Question

In 1960s, President Kennedy had nearly doubled the rate of US economic growth, from 2.5 to 4.7% per year, by implementing a series of depreciation reforms, temporary investment tax credits, and tax cuts. Unfortunately, the rapid rate of economic growth has lasted only through the 1960s and dropped below 4% per year by the early 1970s. Using the IS curve, illustrate and explain the short run effects of Kennedy’s investment tax credits on the US economy. In your opinion, why were the

growth effects of Kennedys’ policies short-lived? Explain.

Answer 1